The Brisbane real estate market: what should we expect for 2009?

It’s a funny market right now, and no-one really seems to know what’s going to happen over the next 12 months. We’ve spoken with a few agents today who have said that it’s unusually quiet, even for this time of year. People seem to be treading very cautiously, not knowing which way things will go. There’s still a bit of activity at the bottom end, where first home buyers are obviously making the most of the Federal Government’s grants, but once you move past $500,000 it’s fairly slow.

Here’s Michael McNamara from realestate.com.au:

“I suspect that there will be capital moving to property from other asset classes, chasing good returns. I also expect that in the more affordable segments first home buyers will be more active. If we avoid rapidly deteriorating unemployment the prospects for the property market in 2009 are quite good.

However, I also expect that the buyer frenzy of 2002 will not be repeated as buyers approach property purchases in more sober moods.”

The boom years were built on the back of a lot of housing debt, and that’s unlikely to repeat itself for a while yet. Here’s Alex Periello, CEO of the Realogy Franchise Group, which heads up Century 21, Coldwell Banker, and Sotheby’s International:

In his view, prices are getting to a point where buyers are coming out, and interest rates are staying low (he’d like to see 30 year fixed loans at 4.5%!!), which should help buyers. He’d also like to see tax benefits extended to all home buyers in the USA, not just first home buyers. Should they do something similar here in Australia?

Other people are less optimistic. A survey by the Mortgage and Finance Association of Australia found that 60 per cent of Australians reckon property values will drop in 2009. Check out articles at news sites across Australia and there’s a lot of doom and gloom out there:

“the real estate industry here in qld are in denial that house prices are falling and keep talking up the next big boom …” – interested observer of brisbane, Dec 17 2008

“What’s worse than the average 40% of income being spent on mortgages is the fact that the assets they are paying 40% of their income on are going to fall by about 40% …” – Gordon of Brisbane, Dec 1 2008

And sometimes, if you say it often enough, it comes true.

Fortunately most investors see through the pessimism, viewing it as a great opportunity to add to their property portfolio. So even if some homeowners, or prospective buyers, are feeling bearish, others will swoop in and grab some bargains. That’s certainly the view of property guru John McGrath:

“In the past 12 months, the average days-on-market in the Sydney metro region has increased from 40 to 60 days.

“This indicates that buyer psychology is changing, as they have a more considered approach to transactions. But I believe this buyer sentiment will shift in coming months, as property once again becomes the preferred asset to creating wealth.”

Like John, I’m expecting a reasonably good market in 2009, especially later in the year after further interest rate drops. I don’t think the floor will drop from underneath us, nor do I think we’ll soar like we did a few years ago. However, Brisbane real estate should remain steady if the rest of the economy can keep its head above water.